OPEC’s Oil Production Slumps As Saudi Arabia Cuts Output

• OPEC’s oil production fell to 27.31 million barrels per day in July, an 836,000 bpd decline from a month earlier.
• The decline was largely a result of Saudi Arabia delivering on its 1 million barrels per day production cut.
• Libya and Nigeria also saw declines in production in July, but it is reductions from Saudi Arabia and Russia that are tightening the market.

OPEC’s crude oil production from all its member states fell by 836,000 barrels per day (bpd) to 27.31 million bpd in July, due to a 968,000 bpd decline in Saudi output as the Kingdom nearly delivered its promised 1-million-bpd cut last month.

Production in Saudi Arabia, Libya, and Nigeria dropped last month compared to June, while rising production from Iran, Angola, and Iraq offset some of the Saudi reduction, according to secondary sources in OPEC’s Monthly Oil Market Report (MOMR) published on Thursday.

Libya and Iran, however, together with Venezuela, are exempted from the OPEC+ deal binding the other 10 OPEC members in production cuts.

Saudi Arabia, leader of the cartel and the OPEC+ agreement, saw its crude oil production slump by 968,000 bpd from June to average 9.021 million bpd in July, per OPEC’s secondary sources in the report. Due to Saudi Arabia’s voluntary unilateral cut, the Kingdom’s crude oil production has now fallen below the production of Russia, the key partner of OPEC in the OPEC+ alliance. 

Libyan production dropped by 52,000 bpd and Nigerian output fell by 40,000 bpd, marking the other big drops in OPEC’s crude oil production last month. Iraq, Iran, Angola, and Venezuela boosted their respective output, according to OPEC’s secondary sources.

Saudi Arabia will continue to drag OPEC’s production lower in August and September, too, after the Kingdom said last week it would extend its unilateral voluntary cut into September. Russia, for its part, also announced an extension in its export cuts into September, although the pledged cut will be lower than in August.  

Russia will cut oil exports by 300,000 bpd in September, Deputy Prime Minister Alexander Novak said last week, shortly after the Saudi announcement of its production extension. Russia has said it would reduce its August oil exports by 500,000 bpd. 

Analysts and market participants expect the OPEC+ cuts to tighten the market for the rest of the year.

By Charles Kennedy for Oilprice.com

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